Thomas Cook shares surge on strategy update

Shares in travel group Thomas Cook have surged 14% after it announced details of its turnaround strategy.

The company hopes to save £350m by 2015, largely through cutting store numbers and focusing on internet sales.

Last week, Thomas Cook said it would cut 2,500 jobs in the UK and close 195 of its 1,069 High Street stores.

Unveiling its strategy update, the firm said it would deliver "personalised holiday experiences through a high-tech, high-touch approach".

Thomas Cook has struggled over the last couple of years with a slump in sales, triggered by the unrest in the Middle East and North Africa in 2011 that affected its extensive operations in Egypt and Tunisia.

The company has since struggled with high debt and the wider downturn in the global travel sector.

Last year, it secured a £1.4bn refinancing package, giving it a further three years to repay its debts, and was also forced to sell and lease back 17 planes.

Online focus

In its update, the company said it would raise up to £150m through the disposal of non-core businesses.

It also expressed its ambitions to expand online.

"A key priority of the group is to become the leading online tour operator with a digital platform that will host a full portfolio of digital products and services," it said, adding that it would reduce the number of customer-facing online brands and websites to three in the UK and one in Germany,

In addition, it plans to ramp up its presence in "hotel concepts", city breaks and winter holidays.

Thomas Cook appointed Harriet Green as chief executive in May last year, tasking her with turning around the group's fortunes.

"Our business transformation plans are ahead of schedule and already delivering substantially improved performance, which resulted in our recent return to the FTSE 250," she said in Wednesday's update.

"The operational credibility of this strategy rests on the success of our self-help measures to date, our trusted brand and the clear targets and KPIs [key performance indicators] against which we are ready to be judged."

Graeme Smith, partner at advisory and restructuring firm Zolfo Cooper, said Thomas Cook's retreat from the High Street was "sad but not unexpected", given the dominance of the internet in the mainstream travel market.

"A stronger online Thomas Cook will be a counterweight to the online travel agents (OTAs) such as Expedia and Hotels.com," he said.

"More competition may help hotels by driving down OTA booking fees, which have been able to grow to up to 30% of the room rate, but this could take time."